Gatheru and Kabiru Certified Public Accountants have recently started to give
business advice to their clients. Acting as consultants, they have estimated the
demand curve of a client’s firm to be;
AR = 200 – 8Q
Where AR is average revenue in millions of shillings and Q is the output
in units.
Investigations of the client firm’s cost profile shows that marginal cost (MC) is
given by:
MC = Q2
– 28Q + 211 (in millions of shillings)
Further investigations have shown that the firm’s cost when not producing
output is Sh. 10 million.
Required:
(i) The equation of total cost. (5 marks)
(ii) The equation of total revenue (2 marks)
(iii) An expression for profit (2 marks)
(iv) The level of output that maximizes profit (5
marks)
(v) The equation of marginal revenue (2 marks)